Until recently Canada’s banking industry exuded an image of ultra conservatism that, to some extent, was expected by the general public. Let’s face it, you wouldn’t want your friendly banker to arrive at work with blue suede shoes, a fluorescent tie and a patterned shirt from some South Pacific island paradise. Whose money was he really spending?
But times are changing. With deregulation, banks have entered the not-so-conservative securities industry and, in a new twist, stock promoters like Murray Pezim want to get into the banking business. He plans to set up a merchant bank called Prime Capital based in the heart of Vancouver’s venture capital market; it would fund juniors to production once a viable orebody had been proven up. This money isn’t always available to juniors in western Canada under favorable terms and Mr Pezim feels it’s time that situation changed.
So do a lot of others including Expo 86 Chairman James Pattison, Royex Chairman Ned Goodman, John Ing of Maison Placements, and John Ivany, a vice-president at Noranda, who will head up the publicly-traded Prime Capital. Add a little show biz in the form of Myron Gottlieb of Cineplex Odeon and you have a board with what Mr Pezim would probably call Pez-azz.
Although details remain to be worked out, he states that about $250 million will be raised to get the bank off the ground — some of it in Europe where ironically many juniors end up going for production financing. It is a bold move and we wish Mr Pezim luck.
But with Michael Wilson’s June 18 paper on tax reform we wonder just how many new mines will be coming on stream in the years ahead. Elimination of earned depletion (33%), increased capital gains tax and a lower capital gains exemption could spell the death of today’s popular flow-through financing mechanism. There may not be many new mines to finance.
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